Large Scale Economic Reform

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Large Scale Economic Reform

Post by Scott Baker on Wed Oct 19, 2011 3:29 pm

What are your suggestions for major economic reform?
These are my top 4:

The Top Four Economic Reforms in terms of Impact

The following are 4 major economic reforms that would completely turn our economy around to the positive, forever. They are all multi-trillion dollar changes, and all but the last have been implemented to a greater or lesser degree at one time or another in our history, yet they are all consistent with our professed American values of competition, fair play, economic and ecological sustainability, and profiting from one’s own labor.

1. Greenbacker Money: debt-free United States Notes that Congress is empowered to create anytime, for any reason, and DID create under Lincoln ($450 million) to defeat the South under the Civil War. This money would not have to be borrowed, taxed to raise, or backed by gold. It need not be inflationary if dedicated towards those areas of society that are actually in deflation, such as Infrastructure. It is, as Max Keiser put it to me, a "Public Option for Money." Congress can authorize new U.S. Notes anytime, for any reason, in any amount. Perhaps $4 trillion, spread over 10 years, should be directed towards infrastructure, to start.

2. Land Value Taxation, aka the Single Tax: This Georgist idea would end the private collection of resource and locational rent and speculation thereon by taxing it before booms could occur, thereby curing Land-based booms and busts like the current one, forever. Furthermore, by taxing the 33%-40% of GDP that is "Rent" on location and natural resources, one could untax all actual production, thereby vastly simplifying the tax code (and removing opportunities for corruption), and freeing up vast American productive capacity in a naturally efficient, green, and sustainable way. There is over half a trillion in assessed values in NYC alone, which, if properly taxed at 8%, would eliminate the need for all other municipal taxes. This idea has been successfully applied hundreds of times in towns and cities all over the world and is perhaps the most established economic theorem in the world.

3. Create State Banks: like the wildly successful Bank of North Dakota (est. 1919) to force state tax revenues to be invested in state needs, and not in Wall Street speculative exercises - money which then has to be borrowed back, at interest rates of 4%-6%. The pension funds of most states are invested in risky, often underperforming mutual fund type investments, where managers charge millions in fees. Why not put those funds into a State Bank, with more reliable, possibly even higher, returns, that could create jobs in the state, instead of being invested in everything from China to short positions? The Bank of North Dakota manages $4 billion in loans. Public Banks in larger states would have correspondingly larger reserves and could respond directly to community needs and even emergencies.

4. Audit the local, state, and national Comprehensive Annual Financial Reports (CAFRs). It’s estimated that there are 10s of trillions in the 184,000 CAFRs nationwide. These funds, many of which are invested outside the country, could be used to pay a citizen’s dividend in perpetuity, guaranteeing a lifetime of support for every American citizen. But we need an army of impartial accountants to comb through the CAFRs and to do so every year, for the benefit of the American people.

-- Scott Baker, President of Common Ground-NYC; New York State Coordinator for Public Banking; Blogger for Huffington Post / Op Ed News; 3rd year student of Henry George School of Social Science, NYC.

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I agree: Its the money, stupid!

Post by deezthugs on Wed Oct 19, 2011 4:15 pm

A "Public Option for Money" strikes at the heart of the economic problems today. Doing away with debt-based money is key.

Until this happens we will always have gigantic public debt that just should not exist. This is the number one educational issue that is faced. Joe and Jane citizen have no idea how and by whom money is created.

Cheers,

David

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Re: Large Scale Economic Reform

Post by randallburns on Fri Oct 21, 2011 10:12 am

The lead guy on greenbacks is Steve Zarlenga at the American Monetary Institute.

I'm familiar with LVT and supportive in general principal-however, I think you need to grandfather in small holdings and phase it in along with elimination of the most regressive taxes. One issue with LVT is land values have traditionally been reserved for taxation by local governments. There is hesitation about getting the federal government involved in that area. The federal government can tax capital gains that are there specifically because localities failed to use the revenues available to them. I think the case for LVT is much more compelling if you look at the upward pressure on land values if you eliminate other taxes-particularly the most regressive taxes. The folks with under $1 Million in assets are in a very vulnerable position right now-and we need to be very careful with their taxes.

The big thing i think you left out here is specific regulation and taxation of monopolies and extreme concentration of wealth. I'd be happy to review with you privately how that is covered in the writings of Henry George. In the modern situation we find ourselves in, the assets of the upper 1%(i.e. families with above $5 Million in net worth) have grown extremely rapidly. Land values played a role in that-but monopolies of scale also played a huge role. I think it is questionable whether LVT alone will be a enough to deal with that situation.

I'd also include George's proposed substitution of prizes for intellectual property. Sen. Saunders has already introduced legislation to do that for drugs-and that approach can be extended. Making key technologies open source would open a lot of options for new businesses fast.

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Land Rich but Cash Poor: The Poor Widow Problem

Post by Scott Baker on Sat Oct 22, 2011 4:03 am

Land Value Tax proponents have long considered the issue of someone who is land rich but cash poor, such as a widow who has a little land in a valuable neighborhood, but not much income. In that case, most Georgists (those who believe in LVT/Single Tax), propose deferral of tax until such time as the property changes hands, then the tax, with interest, would be paid. Naturally, this will drive the price down, which will increase the opportunity for the next person, but also weed out the current owners who are crying crocodile tears and are really just sitting on property and hoping to make a killing re-selling it.
In practice, about 70% of land owners would see no change or even a reduction in the amount they pay in taxes because other taxes would go away and even their buildings would be untaxed.
Large holdings by speculators who haven't developed their lands would be taxed much higher, forcing them to develop their land or sell it to someone who can.

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Re: Large Scale Economic Reform

Post by randallburns on Wed Oct 26, 2011 9:24 pm

Here's the thing:
almost all increases in assets for a while have been going to the upper 5% mostly the upper 1%. just having an exemption in place(and it can be hefty, say $1 Million) removes most of the initial problems from stuff like someone who just bought a piece of proprety and invested their life savings and what not. These changes can be gradual.

I think the main key is to gradually get folks used to the idea that real estate is not a high leverage investment. You need to create a situation where building and making stuff is where the money is made.

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Re: Large Scale Economic Reform

Post by Post Gold Standard on Wed Oct 26, 2011 9:32 pm

You must first clearly understand how the current system (post 1971 end of gold standard) works before proposing change to that system or you will end up with many unintended consequences.

A fiat currency issuer (US, Japan, UK but not Greece, Portugal, Ireland) has a privilege position within the economy because the issuer has monopoly control over fiat money. The position comes with unique capabilities:
1. Currency issuers determine interest rates (ie. the interbank overnight lending rate) because as monopolists they are the price setters.
2. Currency issuers don’t need to “raise” money. Fiat money (Latin fiat, meaning “let it be done”) is money that has value because of government law (Article 1, section 8, 10). Currency issuers (USA) create money when they spend and destroy money when they tax. Taxes for currency issuers serve to regulate the economy (reduce demand) not fund public spending.
3. Currency issuers don’t need to borrow money. “Borrowing” (bonds/bills) for a currency issuer only serves to provide risk-free savings for the private/foreign sector. A currency issuer can never default on a loan except by choice (such as self-imposed debt ceilings) because they have the capacity to create money.
Fiat currency issuer’s are essentially the scorekeepers within the economy – not the players (ie. currency users). They are are unlike other participants in the marketplace precisely because they create money by spending and not from earnings or borrowing like other currency users. Deficits and surpluses are accounting identities to currency issuer’s not constraints of finite resources. Government deficits are dollar for dollar equal to private/foreign sector savings.
government deficits = non-government surplus (ie. private & foreign savings)
A monetarily sovereign government as monopoly currency issuer has the sole prerogative and corresponding responsibility to provide the correct amount of currency to balance spending power (nominal aggregate demand) with goods for sale (real output capacity). If the government issues currency (nongovernment net financial assets) in an amount that results in effective demand in excess of productive potential to expand capacity to meet it, demand-side inflation will occur due to demand exceeding supply. Conversely, if the government falls short in maintaining this balance, so that supply exceeds demand and inventories build up, business contracts. Recession and unemployment result due to insufficient demand relative to supply (like now). Carried to an extreme, deflation results, especially if there is debt destruction (heaven forbid).

Complete study and videos here: http://pragcap.com/resources/understanding-modern-monetary-system

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